IP: Feds nab two PC crypto-exporters allegedly shipping to China

[David Farber <dave@farber.net>]

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>Date: Thu, 30 Aug 2001 22:51:25 -0400
>To: politech@politechbot.com
>From: Declan McCullagh <declan@well.com>
>
>Here's some background on the KIV-7HS crypto-hardware, which is what these 
>poor saps allegedly were trying to buy:
>
>http://www.rainbow.com/mykoweb/kiv7hs.htm
>>Rainbow Mykotronx's KIV-7HS module is a compact, economical, 
>>high-performance, and user-friendly COMSEC device specifically designed 
>>to meet PC users' needs for secure data communication links. The KIV-7HS 
>>protects classified and sensitive digital Type 1 data transmissions at 
>>data rates up to 1.54 Mbps, and is ideal for compliance with Government 
>>directives NACSI 6002 and DoD Instruction 5210.74.
>
>-Declan
>
>********
>
>Date: Thu, 30 Aug 2001 22:06:58 -0400
>Message-Id: <200108302206.AA89522232@mail.cipherwar.com>
>Mime-Version: 1.0
>Content-Type: text/plain; charset=us-ascii
>From: " Scully@cipherwar.com" <Scully@cipherwar.com>
>To: <declan@well.com>
>Subject: "Attempted" Illegal Export of Military Crypto to China
>
>U.S. Customs Arrests Two for Attempting to Export Military Encryption 
>Technology to China
>Thursday, August 30, 2001
>
>Washington, D.C. -- The U.S. Customs Service today announced the arrest of 
>two individuals in Missouri and California for attempting to export 
>military encryption technology to China in violation of the Arms Export 
>Control Act.
>
>The arrests followed a four-month investigation by the Customs Special 
>Agent-in-Charge Office in Baltimore. The Defense Department's Defense 
>Security Service assisted in the investigation.
>
>"The technology that these individuals were attempting to export to China 
>is among the most sensitive items on the U.S. munitions list," said Allan 
>Doody, the Customs Special Agent-in-Charge in Baltimore. "The sale of 
>these units is so tightly controlled that the National Security Agency 
>must approve it."
>
>According to an affidavit filed yesterday in federal court, Eugene You 
>Tsai Hsu, of Blue Springs, Missouri, and David Tzu Wvi Yang, of Temple 
>City, California, were attempting to export to China encryption devices 
>used to secure and safeguard classified communications. Hsu was arrested 
>last night at his home in Blue Springs, Mo. Yang was arrested yesterday at 
>his place of business in Compton, Calif.
>
>The KIV-7HS encryption unit/technology is designed for government use only 
>and cannot be legally exported from the U.S. without first obtaining an 
>export license from the State Department. U.S. Customs received written 
>confirmation from the State Department that China is prohibited from 
>acquiring KIV-7HS unit/technology from the U.S.
>
>In May 2001, Hsu contacted Mykotronx, Inc., a private company located in 
>Columbia, Maryland, to inquire about the cost of the KIV-7HS 
>unit/technology. A security officer at Mykotronx subsequently contacted 
>U.S. Customs agents in Baltimore to alert them to Hsu's interest in 
>obtaining the technology. U.S. Customs agents instructed Mykotronx to 
>inform Hsu that all future inquiries relative to the KIV-7HS units would 
>be handled through an intermediary import/export entity located in Maryland.
>
>Between May 2, 2001, and August 18, 2001, an undercover Customs agent, 
>posing as the intermediary, engaged in a series of telephone conversations 
>and faxed correspondence with Hsu, Charlson Ho, and David Yang. The 
>telephone conversations and correspondence revealed that Ho, affiliated 
>with Wei Soon Loong Private, LTD, a Singapore-based company, was the buyer 
>of the KIV-7HS units.
>
>Ho disclosed to the Customs undercover agent that his freight forwarder, 
>David Yang, would handle the export of the KIV-7HS units through his 
>business in Compton, California -- Dyna Freight. A check of Immigration 
>and Naturalization Service (INS) records indicated that Yang was born in 
>Taiwan and is a permanent resident alien of the United States.
>
>The undercover U.S. Customs agent advised Hsu that the KIV-7HS units are 
>Munitions List items and would require a license for export. Hsu asked if 
>the undercover agent could obtain the license. After being told by the 
>undercover agent that no license would be approved for export to China and 
>that export to China would be a violation of the Arms Control Export Act, 
>Hsu continued to show interest. A check of INS records confirmed that Hsu 
>is a naturalized U.S. citizen.
>
>On August 24, Yang confirmed to the U.S. Customs undercover agent that the 
>KIV-7HS units would be shipped from Los Angeles through Taipei to 
>Singapore, where Ho would then forward the units to China.
>
>Persons or companies engaged in the export of items included on the U.S. 
>Munitions List to all foreign countries must be registered with the State 
>Department, Office of Defense Trade Controls. In addition to registration 
>with the State Department, persons or companies must apply for and obtain 
>a license from that agency for each item on the Munitions List exported to 
>a foreign country, which is the intended final destination of the goods.
>
>Source: http://www.customs.ustreas.gov/hot-new/pressrel/2001/0830-00.htm
>
>
>
>
>
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